Last week, Peloton announced its plan to buy Precor, a large global fitness equipment manufacturer and distributor, in a deal valued at $420 million. With this deal, Peloton will establish manufacturing capacity in the U.S., expand its research and development capabilities with the addition of the Precor team, and accelerate Peloton’s penetration of the commercial market.
Based in New York, Peloton has a fitness community of more than 3.6 million members. They sell bikes, treadmills, apparel, accessories and an app that gives fitness subscribers access to a variety of workouts including strength, yoga, running, stretching, cycling, bootcamp, and more. A digital membership is available for $12.99 a month. Peloton equipment is pricy, but it offers monthly payment options. The digital membership that is available through the app is a separate fee. As of September 30, 2020, Peloton reported a 12-month retention rate of 92%.
With more than 40 years of experience in the commercial fitness equipment market, Precor serves more than 100 countries worldwide. Product categories include cardio, strength, functional fitness, group training and connected solutions. This year, Precor recorded 1 billion workouts in the Preva® fitness cloud. That represents more than 140,000 connected units in more than 13,000 facilities. On average, Precor users exercise more than 20 million minutes of workouts daily.
After the deal is complete, the Seattle-based Precor will operate as a separate business unit. Precor president Rob Barker will become CEO, Precor and general manager of the Peloton commercial division. He will report to William Lynch, president of Peloton. Precor will continue to service its commercial customers worldwide. The deal is expected to close in early 2021.
Company leaders comment on deal
“Precor embodies the Peloton mission of putting members first. Over the last few months, we've gotten to know the team and saw firsthand how much they care about their products, customers and, last but not least, their employees. By combining our talented and committed R&D and Supply Chain teams with the incredibly capable Precor team and their decades of experience, we believe we will be able to lead the global connected fitness market in both innovation and scale. We're looking forward to integrating the Precor team into Peloton and excited about what this means for the future of our brand and our ability to continue delivering world-class member experiences,” said Lynch.
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“Precor is driven to create personalized health and fitness experiences that help people live the lives they desire. That passion has led us to create highly customizable solutions running on the fitness industry's largest commercial network,” said Barker. “The Precor team is excited to combine our manufacturing expertise and more than 40 years of equipment innovations with Peloton's award-winning workout experiences to help commercial customers succeed and keep exercisers moving.”
Manufacturing in the U.S.
Precor has 625,000 square feet of manufacturing capacity in the U.S., complete with in-house tooling and fabrication, product development, and quality control operations in its facilities in Whitsett, North Carolina and Woodinville, Washington. Once the deal is finalized, Peloton will control the entire production process. These new capabilities will help Peloton to get their connected fitness products to members sooner and to scale their business as needed. Peloton currently has a network of third-party manufacturers in Taiwan. During the pandemic, Peloton had to increase capacity to meet increased demand. This acquisition may help Peloton better meet member expectations in the future.
Research and development investment
Peloton’s acquisition of Precor will add nearly 100 research and development staff to Peloton’s team. The expanded R&D team will focus on designing and creating new connected fitness experiences.
Scaling commercial business
Currently, Precor is one of the largest commercial fitness providers in the world. Peloton will leverage Precor’s commercial presence to make Peloton accessible to more people through Precor’s existing relationships with hotels, multifamily properties, and college and corporate campuses. After the deal is complete, Precor customers will have access to Peloton connected fitness products.
This is a great strategic move for Peloton. The company has seen significant growth in the individual and membership sectors in 2020, including digital membership enrollments, but to expand to the commercial market effectively, it needs a partner. By acquiring Precor, Peloton gets access to a new commercial audience, and it exponentially increases the company’s ability to scale its manufacturing and R&D capacity.